Settling Internal Orders


After completing this lesson, you will be able to Perform internal order settlement and understand the concept of distribution rules.

Internal Order Settlement

Internal orders are usually used as an interim collector of costs and an aid to the planning, monitoring, and reporting processes. When the task is completed, the costs are passed on to their final receiving object, like cost center, WBS element, or profitability segment. This process is called settlement.

In settlement, some or all costs posted to an order are allocated to one or more receivers. The offset postings, which credit the order, are generated automatically. You can process settlement for individual orders or collectively for a group of orders.

The costs gathered on an order can be settled on a variety of account assignment objects:

  • Settlement to an asset or G/L account is referred to as external settlement since it updates the Financial Accounting system.
  • Settlement to another management accounting object, such as a cost center, WBS element, or profitability segment, is known as internal settlement.

You can settle statistically to a cost center, statistical order, or statistical WBS element in addition to the real receivers.

Order settlement is not mandatory, so the order can remain with a balance indefinitely.

Distribution Rule

The distribution rule specifies which portion of the order costs should be settled to which receiver. Each line in the distribution table defines the allocation to a particular receiver. Costs can be allocated to the receivers based on the following:

  • Percentage settlement
  • Equivalence numbers

  • Amount settlement.

The following settlement types are defined in the system for overhead orders:

  • Periodic Settlement: This settlement type settles only the costs incurred within the specified period.

  • Full Settlement: This settlement type settles all costs on a sender object up until the settlement period.

Each time an object is settled, a settlement document is created. In addition to the settlement document, the system also creates:

  • A document in FI containing all accounting-related data (external settlement only).

  • A document in CO containing purely cost accounting-related data.

Create Internal Order Settlement Rules

Settle an Internal Order

Log in to track your progress & complete quizzes